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July 31, 2006
July 30, 2006
Betraying Spinoza
Thursday marked the 350th anniversary of the excommunication of the philosopher Baruch Spinoza from the Portuguese Jewish community of Amsterdam in which he had been raised.
Given the events of the last week, particularly those emanating from the Middle East, the Spinoza anniversary didn't get a lot of attention. But it's one worth remembering — in large measure because Spinoza's life and thought have the power to illuminate the kind of events that at the moment seem so intractable and overwhelming.
The exact reasons for the excommunication of the 23-year-old Spinoza remain murky, but the reasons he came to be vilified throughout all of Europe are not. Spinoza argued that no group or religion could rightly claim infallible knowledge of the Creator's partiality to its beliefs and ways. After the excommunication, he spent the rest of his life — he died in 1677 at the age of 44 — studying the varieties of religious intolerance. The conclusions he drew are still of dismaying relevance.
The Jews who banished Spinoza had themselves been victims of intolerance, refugees from the Spanish-Portuguese Inquisition. The Jews on the Iberian Peninsula had been forced to convert to Christianity at the end of the 15th century. In the intervening century, they had been kept under the vigilant gaze of the Inquisitors, who suspected the “New Christians,” as they were called even after generations of Christian practice, of carrying the rejection of Christ in their very blood. It can be argued that the Iberian Inquisition was Europe's first experiment in racialist ideology.
Spinoza's reaction to the religious intolerance he saw around him was to try to think his way out of all sectarian thinking. He understood the powerful tendency in each of us toward developing a view of the truth that favors the circumstances into which we happened to have been born. Self-aggrandizement can be the invisible scaffolding of religion, politics or ideology.
Against this tendency we have no defense but the relentless application of reason. Reason must stand guard against the self-serving false entailments that creep into our thinking, inducing us to believe that we are more cosmically important than we truly are, that we have had bestowed upon us — whether Jew or Christian or Muslim — a privileged position in the narrative of the world's unfolding.
Spinoza's system is a long deductive argument for a conclusion as radical in our day as it was in his, namely that to the extent that we are rational, we each partake in exactly the same identity.
Spinoza's faith in reason as our only hope and redemption is the core of his system, and its consequences reach out in many directions, including the political. Each of us has been endowed with reason, and it is our right, as well as our responsibility, to exercise it. Ceding this faculty to others, to the authorities of either the church or the state, is neither a rational nor an ethical option.
Which is why, for Spinoza, democracy was the most superior form of government — only democracy can preserve and augment the rights of individuals. The state, in helping each person to preserve his life and well-being, can legitimately demand sacrifices from us, but it can never relieve us of our responsibility to strive to justify our beliefs in the light of evidence.
It is for this reason that he argued that a government that impedes the development of the sciences subverts the very grounds for state legitimacy, which is to provide us physical safety so that we can realize our full potential. And this, too, is why he argued so adamantly against the influence of clerics in government. Statecraft infused with religion not only dissolves the justification for the state but is intrinsically unstable, since it must insist on its version of the truth against all others.
Spinoza's attempt to deduce everything from first principles — that is, without reliance on empirical observation — can strike us today as quixotically impractical, and yet his project of radical rationality had concrete consequences. His writings, banned and condemned by greater Christian Europe, but continuously read and discussed, played a role in the audacious experiment in rational government that gave birth to this country.
The Declaration of Independence, that extraordinary document first drafted by Thomas Jefferson, softly echoes Spinoza. John Locke, Spinoza's contemporary — both were born in 1632 — is a more obvious influence on Jefferson than Spinoza was. But Locke had himself been influenced by Spinoza's ideas on tolerance, freedom and democracy. In fact, Locke spent five formative years in Amsterdam, in exile because of the political troubles of his patron, the Earl of Shaftesbury.
Though Spinoza was already dead, Locke met in Amsterdam men who almost certainly spoke of Spinoza. Locke's library not only included all of Spinoza's important works, but also works in which Spinoza had been discussed and condemned.
It's worth noting that Locke emerged from his years in Amsterdam a far more egalitarian thinker, having decisively moved in the direction of Spinoza. He now accepted, as he had not before, the fundamental egalitarian claim that the legitimacy of the state's power derives from the consent of the governed, a phrase that would prominently find its way into the Declaration.
Locke's claims on behalf of reason did not go as far as Spinoza's. He was firm in defending Christianity's revelation as the one true religion against Spinoza's universalism. In some of the fundamental ways in which Spinoza and Locke differed, Jefferson's view was more allied with Spinoza. (Spinoza's collected works were also in Jefferson's library, so Spinoza's impact may not just have been by way of Locke.)
If we can hear Locke's influence in the phrase “life, liberty and the pursuit of happiness,” (a variation on Adam Smith's Locke-inspired “life, liberty and pursuit of property”), we can also catch the sound of Spinoza addressing us in Jefferson's appeal to the “laws of nature and of nature's God.” This is the language of Spinoza's universalist religion, which makes no reference to revelation, but rather to ethical truths that can be discovered through human reason.
Spinoza had argued that our capacity for reason is what makes each of us a thing of inestimable worth, demonstrably deserving of dignity and compassion. That each individual is worthy of ethical consideration is itself a discoverable law of nature, obviating the appeal to divine revelation. An idea that had caused outrage when Spinoza first proposed it in the 17th century, adding fire to the denunciation of him as a godless immoralist, had found its way into the minds of men who set out to create a government the likes of which had never before been seen on this earth.
Spinoza's dream of making us susceptible to the voice of reason might seem hopelessly quixotic at this moment, with religion-infested politics on the march. But imagine how much more impossible a dream it would have seemed on that day 350 years ago. And imagine, too, how much even sorrier our sorry world would have been without it.
Rebecca Newberger Goldstein is the author, most recently, of “Betraying Spinoza: The Renegade Jew Who Gave Us Modernity.”
Given the events of the last week, particularly those emanating from the Middle East, the Spinoza anniversary didn't get a lot of attention. But it's one worth remembering — in large measure because Spinoza's life and thought have the power to illuminate the kind of events that at the moment seem so intractable and overwhelming.
The exact reasons for the excommunication of the 23-year-old Spinoza remain murky, but the reasons he came to be vilified throughout all of Europe are not. Spinoza argued that no group or religion could rightly claim infallible knowledge of the Creator's partiality to its beliefs and ways. After the excommunication, he spent the rest of his life — he died in 1677 at the age of 44 — studying the varieties of religious intolerance. The conclusions he drew are still of dismaying relevance.
The Jews who banished Spinoza had themselves been victims of intolerance, refugees from the Spanish-Portuguese Inquisition. The Jews on the Iberian Peninsula had been forced to convert to Christianity at the end of the 15th century. In the intervening century, they had been kept under the vigilant gaze of the Inquisitors, who suspected the “New Christians,” as they were called even after generations of Christian practice, of carrying the rejection of Christ in their very blood. It can be argued that the Iberian Inquisition was Europe's first experiment in racialist ideology.
Spinoza's reaction to the religious intolerance he saw around him was to try to think his way out of all sectarian thinking. He understood the powerful tendency in each of us toward developing a view of the truth that favors the circumstances into which we happened to have been born. Self-aggrandizement can be the invisible scaffolding of religion, politics or ideology.
Against this tendency we have no defense but the relentless application of reason. Reason must stand guard against the self-serving false entailments that creep into our thinking, inducing us to believe that we are more cosmically important than we truly are, that we have had bestowed upon us — whether Jew or Christian or Muslim — a privileged position in the narrative of the world's unfolding.
Spinoza's system is a long deductive argument for a conclusion as radical in our day as it was in his, namely that to the extent that we are rational, we each partake in exactly the same identity.
Spinoza's faith in reason as our only hope and redemption is the core of his system, and its consequences reach out in many directions, including the political. Each of us has been endowed with reason, and it is our right, as well as our responsibility, to exercise it. Ceding this faculty to others, to the authorities of either the church or the state, is neither a rational nor an ethical option.
Which is why, for Spinoza, democracy was the most superior form of government — only democracy can preserve and augment the rights of individuals. The state, in helping each person to preserve his life and well-being, can legitimately demand sacrifices from us, but it can never relieve us of our responsibility to strive to justify our beliefs in the light of evidence.
It is for this reason that he argued that a government that impedes the development of the sciences subverts the very grounds for state legitimacy, which is to provide us physical safety so that we can realize our full potential. And this, too, is why he argued so adamantly against the influence of clerics in government. Statecraft infused with religion not only dissolves the justification for the state but is intrinsically unstable, since it must insist on its version of the truth against all others.
Spinoza's attempt to deduce everything from first principles — that is, without reliance on empirical observation — can strike us today as quixotically impractical, and yet his project of radical rationality had concrete consequences. His writings, banned and condemned by greater Christian Europe, but continuously read and discussed, played a role in the audacious experiment in rational government that gave birth to this country.
The Declaration of Independence, that extraordinary document first drafted by Thomas Jefferson, softly echoes Spinoza. John Locke, Spinoza's contemporary — both were born in 1632 — is a more obvious influence on Jefferson than Spinoza was. But Locke had himself been influenced by Spinoza's ideas on tolerance, freedom and democracy. In fact, Locke spent five formative years in Amsterdam, in exile because of the political troubles of his patron, the Earl of Shaftesbury.
Though Spinoza was already dead, Locke met in Amsterdam men who almost certainly spoke of Spinoza. Locke's library not only included all of Spinoza's important works, but also works in which Spinoza had been discussed and condemned.
It's worth noting that Locke emerged from his years in Amsterdam a far more egalitarian thinker, having decisively moved in the direction of Spinoza. He now accepted, as he had not before, the fundamental egalitarian claim that the legitimacy of the state's power derives from the consent of the governed, a phrase that would prominently find its way into the Declaration.
Locke's claims on behalf of reason did not go as far as Spinoza's. He was firm in defending Christianity's revelation as the one true religion against Spinoza's universalism. In some of the fundamental ways in which Spinoza and Locke differed, Jefferson's view was more allied with Spinoza. (Spinoza's collected works were also in Jefferson's library, so Spinoza's impact may not just have been by way of Locke.)
If we can hear Locke's influence in the phrase “life, liberty and the pursuit of happiness,” (a variation on Adam Smith's Locke-inspired “life, liberty and pursuit of property”), we can also catch the sound of Spinoza addressing us in Jefferson's appeal to the “laws of nature and of nature's God.” This is the language of Spinoza's universalist religion, which makes no reference to revelation, but rather to ethical truths that can be discovered through human reason.
Spinoza had argued that our capacity for reason is what makes each of us a thing of inestimable worth, demonstrably deserving of dignity and compassion. That each individual is worthy of ethical consideration is itself a discoverable law of nature, obviating the appeal to divine revelation. An idea that had caused outrage when Spinoza first proposed it in the 17th century, adding fire to the denunciation of him as a godless immoralist, had found its way into the minds of men who set out to create a government the likes of which had never before been seen on this earth.
Spinoza's dream of making us susceptible to the voice of reason might seem hopelessly quixotic at this moment, with religion-infested politics on the march. But imagine how much more impossible a dream it would have seemed on that day 350 years ago. And imagine, too, how much even sorrier our sorry world would have been without it.
Rebecca Newberger Goldstein is the author, most recently, of “Betraying Spinoza: The Renegade Jew Who Gave Us Modernity.”
Senate peak oil commitee transcript
ABARE can't beat a random number generator when it comes to Oil price forcasts.
July 24, 2006
NASA forget Earth
NASA’s Goals Delete Mention of Home Planet - New York Times
David E. Steitz, a spokesman for the National Aeronautics and Space Administration, said the aim was to square the statement with President Bush’s goal of pursuing human spaceflight to the Moon and Mars.
But the change comes as an unwelcome surprise to many NASA scientists, who say the “understand and protect” phrase was not merely window dressing but actively influenced the shaping and execution of research priorities. Without it, these scientists say, there will be far less incentive to pursue projects to improve understanding of terrestrial problems like climate change caused by greenhouse gas emissions.
“We refer to the mission statement in all our research proposals that go out for peer review, whenever we have strategy meetings,” said Philip B. Russell, a 25-year NASA veteran who is an atmospheric chemist at the Ames Research Center in Moffett Field, Calif. “As civil servants, we’re paid to carry out NASA’s mission. When there was that very easy-to-understand statement that our job is to protect the planet, that made it much easier to justify this kind of work.”
July 22, 2006
Shock and Awe versus Rock and Roll
I would like to expand upon several posts I have made in the past regarding the military situation in the Middle East. They will be appended to this post.
In boxing one adapts one's strategy to the opponent. One of the classics is a shorter, stockier boxer fighting someone with a greater reach. The shorter fighter must make the fight inside to nullify getting jabbed from a distance. Take away the advantage. Draw the opponent into clinches, the ropes, and a short range game. Use the leverage "inside".
Below, in a post, I outlined how our CIA perfected this strategy militarily in Afghanistan against the Russians. The Russians had the shock and awe of superior weaponry and greater mobility. To nullify this advantage the CIA increasingly provided better and better weapons to offset each Russian weapon advantage or each new strategy. The History Channel show provides actual footage of how this was done and it is narrated by the actual CIA station chief that provided the weapons and the strategy. The goal becomes obvious- to make the Russians "bleed". The opponent, Russia, was too big to "lose" but eventually not strong enough to survive a thousand cuts and inside "jabs" and uppercuts. Watching, helping, perfecting all of this was a young bin Laden. What did he learn? He learned that one should always keep the enemy "close" and use the ring to your advantage. You don't slug it out in the middle of the ring. Draw the enemy into the corners and use the ropes. Sucker him into the terrain that favors your game. Kabul and the two Soviet-built air bases are in the open. Leave them alone. Too hard to infiltrate in the night (to use urban guerilla tactics). The task was to always draw the Russians away and into the mountains and the passes. This is where a "low tech", hit-and-run (rock and roll) strategy works. The real purpose in the strategy was to politicized all the folks that just wanted to stay out of the way- not get killed (worthy objective IMHO). To do this the muhjadeen had to get the Russians mad enough to systematically overreact. Maximize the Russian frustration and thereby maximize the collateral damage. The Russians eventually were the occupiers and evil. 25M folks wanted them out. Good, bad, or indifferent. The people- get us back to the good days where we could occasionally shoot each other over something important- like drugs/money or religion. Nowhere to hide.
~4 years ago I saw a cartoon that sent a chill up my spine. It was bin Laden sitting is a dusty camp in Afghanistan and asking some ragged guys something like- "how can we get out of this dump and have some real training for these recruits?"
Well, we all know how Russia left Afghanistan (and anyone knowing much about history knows that Afghanistan has NEVER not defeated any invader since Alexander the Great). The real defeat for Russia was at home. The folks there (the Mother's Marches) losing their kids lost patience and lost hope. (Same story going on in Chechnya at the same time and even today.) It has since come to light that one of the primary goals of the Russian military (lessons learned) was how could one lure the USA (or perhaps a China?) into a similar position (quagmire) and then low-tech support that enemy? Let's see now...who were the heroes and architects of our defeat and how did they do it? How does one exploit long-standing tribal and religious/sectarian grudges? How do you exploit simmering civil wars? How did they use the terrain and the people against us? Who is tormenting us now all across our southern border? Duh...(Did we learn anything at all!)
"Rock and Roll" is the future. Rock and roll can whoopass high-tech shock and awe IF (the big IF) one can keep that longer armed opponent tied up inside and out of the middle of the ring. Long enough for the "people" to turn against the "invader". (The Crusader?)
I have posted dozens of times the Minimanual of the Urban Guerilla. The original used in Brazil to try to overthrow the government there. It has morphed over time into newer more refined versions and into Arabic and dozens of languages. It is appended below. If you cannot use the (typically) mountainous terrain to your advantage, you have to take your fight inside the largest cities. These techniques are itemized in the minimanual.
The real goal here is to get the opponent to use shock and awe by the high-tech military as a SUBSTITUTE FOR THE POLICE. Create a military reaction to the frustration of rock and roll that forces high-tech and high casualty events by the military.
KEY- The whole, entire world accepts the necessity of "police" primarily because they are made up of "locals"- people you know, people that speak your language, and because you want "safety"/order. Nowhere in the world do the people like the military performing "police functions".
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Things to ponder from a MILITARY view
1) Afghanistan- gotta be one of the greatest ironies in all of military history! The USA has learned nothing from what we taught the Russians. The only things controlled there now are Kabul and the two former Soviet air bases. About 1% of Afghanistan. The President (Mayor of Kabul) never leaves the city without a US escort. The ongoing civil war there between the former Northern Alliance parties, the drug-lords, and the Taliban/Pushtan alliance only await our "leaving". Or we can stay.
2) Iraq- the civil war there hasn't waited for us to leave. Our own State Department and DOD both estimate the number of al-Qaida fighters at between 200 and 700 at best. Identification of the nationalities of those killed put foreign "insurgents" at 1%. An article on suicide bombers is appended below. My belief as to who is supporting the various military factions and arms supply action there is appended below- (short summary- "just about everyone" INDIRECTLY)
3) Israel/Syria/Lebanon- Hezbollah, Hamas, etc.have studied the above. I believe the game here is the same game. How do you get the opponent to use high-tech shock and awe to create collateral damage in the people? They, the Islamists, have largely failed for years (militarily) to invoke sympathy with their using targets inside Israel. The military goal again is to force the enemy/Israel to use their military as a police force.
4) Turkey/Kurds/Kurdistan- both militaries preparing
5) Pakistan/ISI- (a bullet away and) military buildup
6) Iran- military buildup. Same strategy- draw the opponent in close. After, and/or during, the shock and awe be prepared to rock and roll. Get the opponent's ships into the Strait where the missile defense systems are vulnerable. Close to shore and no over-the-horizon advantage. Go with thousands of low-tech options and forget high-tech.
There is a program on the History Channel about Milt Bearden and the CIA in Afghanistan. The History Channel blurb is the following:
"Heroes Under Fire
When Ronald Reagan was elected president in 1980, one of his top priorities was to do something about the Soviet Union's invasion of Afghanistan. The solution was to send CIA operatives into the occupied nation to train resistance fighters. HEROES UNDER FIRE revisits the secret operation, which was based out of the CIA's field office in Islamabad, Pakistan. Discover how Milt Bearden and his team of CIA officers gradually built a network to funnel arms and cash into Afghanistan and train the rebels to fight."
http://store.aetv.com/html/product/index.jhtml?id=74803
This program, above, details weapon by weapon how the insurgency in Afghanistan was given "just enough" to counter each Russian advance and how each of the Russian technical advantages was met and nullified. RPGs, large mortars, satellite targeting, SAMs, etc. I very highly recommend you try to see it. Why? So you can understand what is really happening in Iraq..........
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All countries, all larger corporations, and virtually all large political organizations have a security and "military" and espionage arm. It is pretty straight forward for countries- they are labeled armies or military services and intelligence organizations. For larger corporations they are labeled security. For political organizations it is of course murkier :) - most are covert and some are overt. The overt have names like "security forces," militias, body guard's, etc.
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The United States has many opponents. Wholesale and retail. The most obvious are a very few countries that are almost seemingly wholesale BUT within the vast majority of all other countries there are cliques or retail opposition. There are many Islamic based organizations that have the same wholesale and retail opposition to the United States. Clearly al Qaeda and a few other extremist organizations have a wholesale approach. Others, the vast majority, have a retail approach.
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Back to countries. One outstanding "conflicted" example is Pakistan's ISI. Clearly there are elements that want the US "outta there" which is balanced with an element that finds the US useful in providing modern arms. If one reads about the ISI, one finds that perhaps half of its budget (income) comes from the government and the other "half"(?) apparently comes from the drug trade. And folks wonder about Pakistan's "commitment"?...
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So to the main point.
Who are the "insurgents" in Iraq? Where do they get their support? Where do they get their arms and explosives? Where do they get their money? Where do they get their specific "expertise" and experts in terrorism? Where do they get their intelligence? Where, where, where........For me the answer is pretty obvious. It comes from ALL OVER THE WORLD ... piecemeal.
I believe there is, as an example, a Chinese "station chief" somewhere that has a covert mission and money and means to INDIRECTLY make the US "bleed" in Iraq. I believe there is a Russian "station chief" somewhere with the same mission. The list goes on and on and on through the various, primarily Islamic organizations.
The goal is not to "defeat" the US in Iraq, it is to follow the US CIA's example in Afghanistan in the 80s - make the military "bleed". Cause discontent at home. Divert military spending. Squander big money on a lost cause. Et cetera, et cetera, et cetera... ( I hope you get to see the History Channel's show)
History never really repeats, but it often rhymes...
It was no news to Tetlock, therefore, that experts got beaten by formulas. But he does believe that he discovered something about why some people make better forecasters than other people. It has to do not with what the experts believe but with the way they think. Tetlock uses Isaiah Berlin's metaphor from Archilochus, from his essay on Tolstoy, “The Hedgehog and the Fox,” to illustrate the difference. He says:
Low scorers look like hedgehogs: thinkers who “know one big thing,” aggressively extend the explanatory reach of that one big thing into new domains, display bristly impatience with those who “do not get it,” and express considerable confidence that they are already pretty proficient forecasters, at least in the long term. High scorers look like foxes: thinkers who know many small things (tricks of their trade), are skeptical of grand schemes, see explanation and prediction not as deductive exercises but rather as exercises in flexible “ad hocery” that require stitching together diverse sources of information, and are rather diffident about their own forecasting prowess.
A hedgehog is a person who sees international affairs to be ultimately determined by a single bottom-line force: balance-of-power considerations, or the clash of civilizations, or globalization and the spread of free markets. A hedgehog is the kind of person who holds a great-man theory of history, according to which the Cold War does not end if there is no Ronald Reagan. Or he or she might adhere to the “actor-dispensability thesis,” according to which Soviet Communism was doomed no matter what. Whatever it is, the big idea, and that idea alone, dictates the probable outcome of events. For the hedgehog, therefore, predictions that fail are only “off on timing,” or are “almost right,” derailed by an unforeseeable accident. There are always little swerves in the short run, but the long run irons them out.
Foxes, on the other hand, don't see a single determining explanation in history. They tend, Tetlock says, “to see the world as a shifting mixture of self-fulfilling and self-negating prophecies: self-fulfilling ones in which success breeds success, and failure, failure but only up to a point, and then self-negating prophecies kick in as people recognize that things have gone too far.”
("hedgehogs"- anyone recognize the description in any of our leaders? Posters? :) )
Hedgehogs and Foxes
Low scorers look like hedgehogs: thinkers who “know one big thing,” aggressively extend the explanatory reach of that one big thing into new domains, display bristly impatience with those who “do not get it,” and express considerable confidence that they are already pretty proficient forecasters, at least in the long term. High scorers look like foxes: thinkers who know many small things (tricks of their trade), are skeptical of grand schemes, see explanation and prediction not as deductive exercises but rather as exercises in flexible “ad hocery” that require stitching together diverse sources of information, and are rather diffident about their own forecasting prowess.
A hedgehog is a person who sees international affairs to be ultimately determined by a single bottom-line force: balance-of-power considerations, or the clash of civilizations, or globalization and the spread of free markets. A hedgehog is the kind of person who holds a great-man theory of history, according to which the Cold War does not end if there is no Ronald Reagan. Or he or she might adhere to the “actor-dispensability thesis,” according to which Soviet Communism was doomed no matter what. Whatever it is, the big idea, and that idea alone, dictates the probable outcome of events. For the hedgehog, therefore, predictions that fail are only “off on timing,” or are “almost right,” derailed by an unforeseeable accident. There are always little swerves in the short run, but the long run irons them out.
Foxes, on the other hand, don't see a single determining explanation in history. They tend, Tetlock says, “to see the world as a shifting mixture of self-fulfilling and self-negating prophecies: self-fulfilling ones in which success breeds success, and failure, failure but only up to a point, and then self-negating prophecies kick in as people recognize that things have gone too far.”
("hedgehogs"- anyone recognize the description in any of our leaders? Posters? :) )
Hedgehogs and Foxes
July 20, 2006
Israel spying in the US
Prior to 9/11, the FBI had discovered the presence of a massive spy ring inside the United States run by the government of Israel. This seems a harsh gratitude from a nation which obtains 10% of its annual budget from the American taxpayer, $3+ billion a year. Over the years, American taxpayers have been required to send Israel more than four times what the US spent to go to the moon.
What Israel has done in return was to set up government subsidized telecommunications companies which operate here in the United States. One of these companies is Amdocs, which provides billing and directory assistance for 90% of the phone companies in the USA. Amdocs' main computer center for billing is actually in Israel and allows those with access to do what intelligence agencies call "traffic analysis"; a picture of someone's activities based on a pattern of who they are calling and when. Another Israeli telecom company is Comverse Infosys, which subcontracts the installation of the automatic tapping equipment now built into every phone system in America. Comverse maintains its own connections to all this phone tapping equipment, insisting that it is for maintenance purposes only. However, Converse has been named as the most likely source for leaked information regarding telephone calls by law enforcement that derailed several investigations into not only espionage, but drug running as well. Yet another Israeli telecom company is Odigo, which provides the core message passing system for all the "Instant Message" services. Two hours before the attacks on the World Trade Towers, Odigo employees received a warning. Odigo has an office 2 blocks from the former location of the World Trade Towers. "I think there is very compelling evidence that at least some of the terrorists were assisted not just in financing -- although that was part of it -- by a sovereign foreign government... It will become public at some point when it's turned over to the archives, but that's 20 or 30 years from now."
-- Senator Graham as quoted in Senator: At Least One Foreign Country Assisted the 9/11 Terrorists
Let us be clear here. There is nothing benign about Israel spying on the United States. When Jonathan Pollard stole our nuclear secrets (which your taxes paid to develop) and sent them to Israel, Israel did not hesitate to trade those secrets to the USSR in exchange for increased emigration quotas.
The implication of these facts is that the billions of our tax dollars sent to Israel (while women and children sleep in America's alleys and eat out of trash bins) have bought and paid for a monstrous phone tracking and phone tapping system that can eavesdrop on almost any phone call in America. Even the White House phones were open to such tapping by listening in on the other end outside the White House itself.
This actually happened. The Ken Starr report on Whitewater describes how Bill Clinton informed Monica Lewinsky that their phone sex conversations had been recorded. At the same time, Clinton ordered the FBI to cease the hunt for an Israeli mole known to be operating inside the White House itself!
So here we have a foreign nation able to listen in on most phones at will, using taps that cannot be found because they are built into the phone system itself, and willing to use the information gleaned from those calls to blackmail Americans into any desired course of action. This may well be what Ariel Sharon meant when he stated that the Jewish people control America.
That the information gleaned from these phone taps is being used to coerce the behavior of key individuals in the US Government and media is illustrated by the manner in which the government and the media have handled this scandal of the largest spy ring ever uncovered inside the United States, and of phone taps on all of our phones. They are downplaying it. Actually, burying it is a better word.
Fox News, alone of all the media, actually ran the story as a four part broadcast, and put the story up on its web site.
Then, without explanation, Fox News erased the story from their web site and have never mentioned it again. CNN followed by "Orwellizing" their report of the two hour advance warning of the WTC attacks sent to Odigo employees. But far more telling is the admission made by a US Official in part one of the Fox News report that hard evidence existed linking the events of 9/11 not to Arab Muslims, but to some of the more than 200 Israeli spies arrested both before and after 9/11, but that this evidence had been CLASSIFIED.
"Investigators within the DEA, INS and FBI have all told Fox News that to pursue or even suggest Israeli spying ... is considered career suicide."
-- Carl Cameron, as quoted in The Spies Who Came In From The Art Sale
What Israel has done in return was to set up government subsidized telecommunications companies which operate here in the United States. One of these companies is Amdocs, which provides billing and directory assistance for 90% of the phone companies in the USA. Amdocs' main computer center for billing is actually in Israel and allows those with access to do what intelligence agencies call "traffic analysis"; a picture of someone's activities based on a pattern of who they are calling and when. Another Israeli telecom company is Comverse Infosys, which subcontracts the installation of the automatic tapping equipment now built into every phone system in America. Comverse maintains its own connections to all this phone tapping equipment, insisting that it is for maintenance purposes only. However, Converse has been named as the most likely source for leaked information regarding telephone calls by law enforcement that derailed several investigations into not only espionage, but drug running as well. Yet another Israeli telecom company is Odigo, which provides the core message passing system for all the "Instant Message" services. Two hours before the attacks on the World Trade Towers, Odigo employees received a warning. Odigo has an office 2 blocks from the former location of the World Trade Towers. "I think there is very compelling evidence that at least some of the terrorists were assisted not just in financing -- although that was part of it -- by a sovereign foreign government... It will become public at some point when it's turned over to the archives, but that's 20 or 30 years from now."
-- Senator Graham as quoted in Senator: At Least One Foreign Country Assisted the 9/11 Terrorists
Let us be clear here. There is nothing benign about Israel spying on the United States. When Jonathan Pollard stole our nuclear secrets (which your taxes paid to develop) and sent them to Israel, Israel did not hesitate to trade those secrets to the USSR in exchange for increased emigration quotas.
The implication of these facts is that the billions of our tax dollars sent to Israel (while women and children sleep in America's alleys and eat out of trash bins) have bought and paid for a monstrous phone tracking and phone tapping system that can eavesdrop on almost any phone call in America. Even the White House phones were open to such tapping by listening in on the other end outside the White House itself.
This actually happened. The Ken Starr report on Whitewater describes how Bill Clinton informed Monica Lewinsky that their phone sex conversations had been recorded. At the same time, Clinton ordered the FBI to cease the hunt for an Israeli mole known to be operating inside the White House itself!
So here we have a foreign nation able to listen in on most phones at will, using taps that cannot be found because they are built into the phone system itself, and willing to use the information gleaned from those calls to blackmail Americans into any desired course of action. This may well be what Ariel Sharon meant when he stated that the Jewish people control America.
That the information gleaned from these phone taps is being used to coerce the behavior of key individuals in the US Government and media is illustrated by the manner in which the government and the media have handled this scandal of the largest spy ring ever uncovered inside the United States, and of phone taps on all of our phones. They are downplaying it. Actually, burying it is a better word.
Fox News, alone of all the media, actually ran the story as a four part broadcast, and put the story up on its web site.
Then, without explanation, Fox News erased the story from their web site and have never mentioned it again. CNN followed by "Orwellizing" their report of the two hour advance warning of the WTC attacks sent to Odigo employees. But far more telling is the admission made by a US Official in part one of the Fox News report that hard evidence existed linking the events of 9/11 not to Arab Muslims, but to some of the more than 200 Israeli spies arrested both before and after 9/11, but that this evidence had been CLASSIFIED.
"Investigators within the DEA, INS and FBI have all told Fox News that to pursue or even suggest Israeli spying ... is considered career suicide."
-- Carl Cameron, as quoted in The Spies Who Came In From The Art Sale
July 19, 2006
The Ugly Truth: Our President is an Imbecile
Cenk Uygur: The Ugly Truth: Our President is an Imbecile
Tue Jul 18, 11:40 AM ET
You know it, I know it and the American people know it. But everyone is afraid to say it. They say it privately, but people are afraid of saying it publicly because you will be branded as a liberal, elite, intellectual snob. But believe me, you don't have to be an intellectual to see how painfully stupid our president is.
Just look at the conversation he is having with world leaders at the G-8 summit. Mikes picked up the causal talk between the world leaders. Forget that Bush appears to have three sandwiches in his mouth while talking. Forget that he calls out to the Prime Minister of Britain as if he is Flounder in "Animal House." Forget that he uses profanity. I don't give a shit about those things.
I thought it was ridiculous that people made fun of George H. W, Bush for vomiting on the Japanese Prime Minister. What was he going to do? He had to puke, so he puked. It happens to the best of us, and more importantly, has nothing to do with his intelligence or how capable he is as a leader.
But his son's verbal vomit does have a lot to do with his ability to lead this country and the world. What I found to be the most damning is the least quoted part of Bush's comments. As you read this transcript, remember that this is not a small child talking, but the President of the United States of America:
possibly Chinese President Hu Jintao, a guest at the summit. Bush: "Gotta go home. Got something to do tonight. Go to the airport, get on the airplane and go home. How about you? Where are you going? Home?
Bush: "This is your neighborhood. It doesn't take you long to get home. How long does it take you to get home?"
Reply is inaudible.
Bush: "Eight hours? Me too. Russia's a big country and you're a big country."
At this point, the president seems to bring someone else into the conversation.
Bush: "It takes him eight hours to fly home."
He turns his attention to a server.
Bush: "No, Diet Coke, Diet Coke."
He turns back to whomever he was talking with.
Bush: "It takes him eight hours to fly home. Eight hours. Russia's big and so is China."
Russia's big and so is China??????? This guys sounds like a third grader. Do you know anyone who would have a conversation like this with their neighbor, let alone a business associate, let alone a world leader? Who's proud to know that Russia is big and so is China?
Can anyone now credibly claim that Bush is secretly working on a master plan behind the scenes and that he's just playing cowboy for the cameras? I hope the master plan doesn't involve figuring out how long it takes to get to China.
If someone is this ignorant, they're usually embarrassed and try not to talk much. But this guy is so dumb he has no idea how dumb he is. This sounds like a conversation you might have with a child, a mentally challenged child. Johnny, do you know how big Russia is? How about China?
This would all be unfortunate if George was your dentist, or worse yet, your accountant. But he is the leader of the free world. This man makes life or death decisions every day. If you say you're not scared about that, you're lying.
Would you let him do the books for your business? Would you trust your company in his hands for eight years? (No matter how Republican you are, you know you just said no to that question.) Would you trust him to be your kids' guidance counselor and take his advice seriously? If your kids were in the Army and he was their field commander, would you feel good about putting their lives in his hands?
Come on, no one is crazy enough to say yes to that. Yet, he has all of our lives in his hands. The emperor has no clothes. The emperor has no clothes. It's about time someone in the mainstream media said it.
In the old empires, there would be a lot of marriages between the royal families. And from time to time, these inter-family marriages would produce a mentally challenged son who would inherit the throne. This would set the empire back for hundreds of years. I'm not saying anything, I'm just saying. Russia is big and so is China.
The Democrats for a long time have felt embarrassed about pointing out the obvious. The emperor has no brain. This is what I can't understand about the Democrats, they're always playing patty cakes while the Republicans are ripping their face off. John Kerry should have stood at the lectern during the debates and pointed to George Bush and said, "The leader of this country has to be the best and the brightest. If any of you think that he is the best and the brightest America has to offer, go ahead and vote for him!"
The theory is that people would be turned off by that. The theory assumes that people are also idiots and they love their cohorts. That is simply not true. Everyone understands that they have a friend they'd like to go fishing with and a friend they can trust to look after their affairs - and they're not necessarily the same guy. And that your fishing buddy might not be a great choice for President of the United States of America.
Kerry should have embarrassed Bush, made people feel sorry for him. It would have hurt in the short run and given him a temporary downward blip in the numbers, but in the end, when people went into that voting booth, they would have felt pity for Bush - in that scenario, Kerry wins easily. Nobody votes for someone they pity.
Unfortunately, right now we are in the position of being pitied by the rest of the world. We have third grader for a President. And worse yet, the Vice President has him convinced he is the second coming of Winston Churchill. Scared yet?
Tue Jul 18, 11:40 AM ET
You know it, I know it and the American people know it. But everyone is afraid to say it. They say it privately, but people are afraid of saying it publicly because you will be branded as a liberal, elite, intellectual snob. But believe me, you don't have to be an intellectual to see how painfully stupid our president is.
Just look at the conversation he is having with world leaders at the G-8 summit. Mikes picked up the causal talk between the world leaders. Forget that Bush appears to have three sandwiches in his mouth while talking. Forget that he calls out to the Prime Minister of Britain as if he is Flounder in "Animal House." Forget that he uses profanity. I don't give a shit about those things.
I thought it was ridiculous that people made fun of George H. W, Bush for vomiting on the Japanese Prime Minister. What was he going to do? He had to puke, so he puked. It happens to the best of us, and more importantly, has nothing to do with his intelligence or how capable he is as a leader.
But his son's verbal vomit does have a lot to do with his ability to lead this country and the world. What I found to be the most damning is the least quoted part of Bush's comments. As you read this transcript, remember that this is not a small child talking, but the President of the United States of America:
possibly Chinese President Hu Jintao, a guest at the summit. Bush: "Gotta go home. Got something to do tonight. Go to the airport, get on the airplane and go home. How about you? Where are you going? Home?
Bush: "This is your neighborhood. It doesn't take you long to get home. How long does it take you to get home?"
Reply is inaudible.
Bush: "Eight hours? Me too. Russia's a big country and you're a big country."
At this point, the president seems to bring someone else into the conversation.
Bush: "It takes him eight hours to fly home."
He turns his attention to a server.
Bush: "No, Diet Coke, Diet Coke."
He turns back to whomever he was talking with.
Bush: "It takes him eight hours to fly home. Eight hours. Russia's big and so is China."
Russia's big and so is China??????? This guys sounds like a third grader. Do you know anyone who would have a conversation like this with their neighbor, let alone a business associate, let alone a world leader? Who's proud to know that Russia is big and so is China?
Can anyone now credibly claim that Bush is secretly working on a master plan behind the scenes and that he's just playing cowboy for the cameras? I hope the master plan doesn't involve figuring out how long it takes to get to China.
If someone is this ignorant, they're usually embarrassed and try not to talk much. But this guy is so dumb he has no idea how dumb he is. This sounds like a conversation you might have with a child, a mentally challenged child. Johnny, do you know how big Russia is? How about China?
This would all be unfortunate if George was your dentist, or worse yet, your accountant. But he is the leader of the free world. This man makes life or death decisions every day. If you say you're not scared about that, you're lying.
Would you let him do the books for your business? Would you trust your company in his hands for eight years? (No matter how Republican you are, you know you just said no to that question.) Would you trust him to be your kids' guidance counselor and take his advice seriously? If your kids were in the Army and he was their field commander, would you feel good about putting their lives in his hands?
Come on, no one is crazy enough to say yes to that. Yet, he has all of our lives in his hands. The emperor has no clothes. The emperor has no clothes. It's about time someone in the mainstream media said it.
In the old empires, there would be a lot of marriages between the royal families. And from time to time, these inter-family marriages would produce a mentally challenged son who would inherit the throne. This would set the empire back for hundreds of years. I'm not saying anything, I'm just saying. Russia is big and so is China.
The Democrats for a long time have felt embarrassed about pointing out the obvious. The emperor has no brain. This is what I can't understand about the Democrats, they're always playing patty cakes while the Republicans are ripping their face off. John Kerry should have stood at the lectern during the debates and pointed to George Bush and said, "The leader of this country has to be the best and the brightest. If any of you think that he is the best and the brightest America has to offer, go ahead and vote for him!"
The theory is that people would be turned off by that. The theory assumes that people are also idiots and they love their cohorts. That is simply not true. Everyone understands that they have a friend they'd like to go fishing with and a friend they can trust to look after their affairs - and they're not necessarily the same guy. And that your fishing buddy might not be a great choice for President of the United States of America.
Kerry should have embarrassed Bush, made people feel sorry for him. It would have hurt in the short run and given him a temporary downward blip in the numbers, but in the end, when people went into that voting booth, they would have felt pity for Bush - in that scenario, Kerry wins easily. Nobody votes for someone they pity.
Unfortunately, right now we are in the position of being pitied by the rest of the world. We have third grader for a President. And worse yet, the Vice President has him convinced he is the second coming of Winston Churchill. Scared yet?
July 18, 2006
THE PRICE OF FREEDOM IN AMERICA
Over 100 death-row prisoners in the USA have been found to be innocent since 1973. If we add non-death-row prisoners found innocent after serving years in prison, the number rises to over 200. More than two thirds of these people got NO COMPENSATION. Not even reimbursement of legal costs. Not even back-pay at standard rates for the work they had to do in prison.
Only 15 of the 50 American States have laws providing compensation for wrongful imprisonment. In 13 of those States the compensation is capped, and the limit is invariably less than what a film star would expect to receive for a defamatory media report. In the other 35 States the legislature can pay compensation if it wants to, which it usually doesn't. The Federal jurisdiction has a compensation scheme under which the maximum payout is $5000 (yes, five thousand dollars).
July 15, 2006
The end of the global economic boom: why inflation is inevitable
I have to confess that I did hesitate for a long time before deciding to commit to paper the following observations, as they will undoubtedly cause some confusion, given the views I have expressed in earlier reports. However, there are times when, within a long-term view, short-term considerations become more significant. From a longer-term perspective, I still maintain that central banks — especially the US Federal Reserve — will have no other option than to print money and that, therefore, in the long run, asset prices will continue to increase — at least in nominal terms.
US MZM has soared as a percentage of GDP in recent years and, as in the case of Japan, has created a huge monetary overhang. And while monetary conditions have tightened relatively in both Japan and the US, because money supply is no longer expanding as a percentage of GDP, looking at credit growth there can be no question that monetary polices are still expansionary. I am grateful to Kurt Richebächer for having recently pointed out that, in the US, in the fourth quarter of 2005, non-financial credit expanded at a new annual record rate of US$2,445.7 billion.
According to Richebächer, this compares with US$1,710.5 billion in the second quarter of 2004, at the end of which the Fed started its rate hikes. Financial credit increased US$1,224.4 billion, as against US$932.7 billion in the second quarter of 2004. In aggregate, overall financial and non-financial credit growth accelerated over this period of rate hikes from US$2,643.2 billion in the second quarter of 2004 to US$3,670.1 billion in the fourth quarter of 2005. In percentage terms, borrowing and lending increased a staggering 38.9%.
According to Richebächer, “the fact to see is that all the rate hikes were undertaken in [the] complete absence of any monetary tightening. Plainly, the Fed has readily provided any bank reserves that the financial system has needed to maintain its credit expansion. It is a farce of monetary tightening. For all of 2005, total credit expanded by $3,340 trillion, to $40,230 trillion, up more than $500 billion from 2004's record $2,818 trillion increase. For comparison, annual total credit growth averaged $1,237 trillion during the 1990s. Trying to capture the dynamics, we compare the credit expansion with the simultaneous increase in real and nominal GDP. Well, in real terms, it was up $378.9 billion in 2005, and in current dollars, 751.4 billion.”
So, in order to generate nominal GDP growth of US$751 billion, in 2005, total credit market debt had to increase by US$3,340 trillion — 4.4 times faster than GDP. Now, as is the case for the current account deficit, which hovers around 7% of GDP at present, the optimists will say that debt growth that is four times larger than GDP growth is sustainable. This may be the case for now, but the point is that, in the 1950s and 1960s, debt and GDP grew at about the same rate, with the result that in 1980, when Paul Volcker tightened meaningfully, total credit market debt was “only” about 130% of GDP.
Then, in the 1980s, debt grew at about two-and-a-half times GDP, in the 1990s at about three times GDP, and now at more than four times. In other words, as GaveKal Research pointed out, in order to sustain the asset bull markets and the economic expansion, debt growth will have to accelerate soon to initially five times GDP, later to six times, and if we extrapolate the trend that has prevailed since the 1960s, eventually to more than 20 times GDP.
Similarly, the current account deficit, which grew from 2% of GDP in 1998 to around 7% of GDP, would have to triple to around 20% of GDP in the next five to seven years in order to sustain the growth rates in foreign official dollar reserves (global liquidity) and economic growth around the world, if the recent trend is extrapolated. Also not forgotten is the US saving rate, which declined from an average of 9% in the 1970s to less than zero at present and turbo- charged the economy. If the stimulative economic impact of a declining saving rate is to be maintained, the saving rate will eventually have to be at around –10%.
Now, you don't need to be an economist with a Harvard education to see that these trends are not sustainable in the long run. However, it is my belief that the Fed, and other central banks which are at least as agile at printing money as the Fed is, will try to postpone the hour of truth by a renewed massive liquidity injection when the next recession arrives. So, my concern remains the same: before the final debt crisis hits, we might see very high rates of inflation — most likely hyperinflation, with all asset and consumer prices soaring (amidst falling real incomes)."
July 09, 2006
On Complacency..
I CONTINUE TO BE amazed at the absolute complacency relating to the stock market right now. Once again, investors have become convinced that there is little risk inherent in stocks and that the only way they can regain their lost fortunes from the past five years is to aggressively pursue the most volatile and risky investments.
In addition to the obvious signs of greed emerging, the opposite emotion fear -- is clearly on the decline. We see a current environment, despite all the obvious risks due to geopolitical issues, rising interest rates (official rates have more than tripled in just over a year), overvaluation of most stocks and record high energy costs, to name a few, of almost unbelievable complacency. This is almost always "rewarded" with pain as the failure to identify and assess risk is tantamount to asking for trouble. One way of quantifying how much or how little the emotion of fear enters into the thinking of investors is by examining a measure of volatility. Since volatility in the indexes measures how much premium sellers of options are demanding to take on the risk of selling options on the indexes to others -- primarily speculators -- it is an excellent way of ascertaining how much or little risk aversion is present.
At major bottoms in stocks, we often see the volatility indexes at extreme highs; conversely, when the stock market is at or near a peak, we usually see volatility at very low levels.
The VIX, or the volatility index, is a measurement of options premium volatility as it relates to the most important benchmark for institutional activity, the S&P 500. This is also the index and option set that I use when it comes time to take a short position on the overall stock market.
The picture this current view portrays is really quite shocking. Despite all the aforementioned risks that are obvious to anyone willing to take off their rose-colored glasses, volatility is at an all-time low. I assure you, this is not a sign of health but of impending disaster for stocks.
Since there is such a diminished view of risk, and since this affects option premium prices, when it comes time for us to take on put options once we achieve critical mass readings in the model, these premiums will be relatively very low.
Consequently, it is entirely possible that we may be able to achieve relatively more leverage than ever as we take on deep-out-of-the-money positions. This is a real bonus that one could not always expect to see just before a market meltdown!
In addition to the above measurement of volatility, or lack thereof, as well as small-cap speculative activity, there are other measurements that are extremely important with respect to contrary indicators.
One of the most well known of these is the put/call ratio which measures the number of put options purchased as a ratio to call option purchases. This is simply another way of determining how bullish or how bearish investors are.
At the present time, the relative number of speculative put purchases is much lower than normal as a ratio to call option purchases. While this is not as effective of an indicator as it used to be (due primarily to institutional hedging) it still gives us a clear perspective that there is very little expectation among the general public of any danger ahead in the stock market. It confirms everything else we have been talking about.
Another measurement of excessive optimism and overly bullish expectations is the actual bullish consensus levels as derived from investment adviser opinion. Since most investment advisers are wrong at major turning points, and since when the consensus becomes nearly universal it always portends an inverse reaction, we know the downturn in stocks cannot be far away.
As of the current readings of bullish consensus as compiled by Market Vane, we see bullishness at a very lofty 70%. This is a level associated with major declines, not further rallies.
There is no question that considering sentiment indication on a broad scale that the stock market is very close to substantial weakness. Add to this the current excitement surrounding corporate takeovers, which usually peak just as the stock market is close to collapse (acquiring companies use the leverage of their overextended stock price to acquire companies they could otherwise not afford to; do you remember AOL/Time Warner right at the peak in 2000?) and the argument is extremely compelling that we will see a downturn very soon.
Ironically, as I have said many times, due to the hoopla that always accompanies the very sentiment we are discussing, it never "feels" like the end is at hand in such environments.
Yet, a careful study of the past clearly demonstrates that this is precisely when most major down moves begin. So, my advice is to make sure you apply logic and not emotion to your current analysis of just how close we are to the most incredible opportunities we may ever see. If you do, I feel certain you will agree that things have rarely been more dangerous with respect to stocks.
July 04, 2006
Consumer Crunch Update
July 1, 2006
This analysis brings our “Consumer Cash Flow,” “Real Estate and Money Supply,” and “The Interest Rate Conundrum” papers up-to-date. In simple terms, U.S. economic growth is completely dependent on consumer and government debt creation. We will track the consumer side effects and show them in the consumer accounts.
The latest 2005 economic statistics show that consumers depended on new debt for more than 90% of their cash flow during 2005. In 2006, we expect new debt to account for 95% of cash flow.
Our “Interest Rate Conundrum” paper was absolutely correct that long-term interest rates now control consumer spending instead of economic investment. In April, mortgage interest rates reached levels that should constrain household debt flows.
We also demonstrated in our March, 2006 update that consumer liquidity was falling sharply. After a brief respite at the end of March, consumer liquidity has resumed its downward trend. Liquidity has fallen to 3 weeks of funds on our preferred measure.
Finally, our “Real Estate and Money Supply” paper created a diagram showing that consumer money supply now flows backward. Historically, household incomes were sufficient to generate a cash surplus after consumption and debt service. Now, households have a large cash deficit.
The conclusion of our March, 2006 update has not changed: The key to the consumer’s future is now home resales. Since home resales peaked in the summer of 2005 and are in a downtrend, we expect a further slowing of home resales and a decline in M-2 growth consistent with our paper on “Money Supply and Real Estate.”
Our 6-step process assumes that new home construction will not slow until after home resales have entered a continuing and persistent decline. In April and May, we have seen the first evidence of new home construction weakness. This weakness could indicate that we have reached Step 5 of our economic process.
In our interpretation of this process and current monetary circumstances, the Federal Reserve MUST continue to raise short-term interest rates in order to prolong the opportunity for U.S. households to access long-term debt at high levels.
The Economic Process
In our paper, “Real Estate and Money Supply,” we outlined the economic trajectory that the U.S. economy is likely to follow. This section will describe that process and will be integrated with our updated economic analysis.
Current information indicates that we have progressed at least to Step 4 of that process. In our opinion, Step 4 is the most important piece of the process and the last point to influence the economic pain in Step 6. The process follows:
Step 1: The Federal Reserve raises interest rates and begins effecting the willingness and ability of consumers to access their back-up liquidity: home equity loans. This piece began in summer of 2004.
Step 2: Consumers allow M-1 growth to stagnate instead of accessing home equity loans to maintain liquidity. M-1 growth reached 0% in November, 2004. Since November, 2004, M-1 has barely changed.
Step 3: Liquidity becomes more dependent on mortgage refinancing. Consumers recognize that the best way to increase short-term liquidity is by controlling large purchases based upon their access to long-term financing. The sales fluctuations in the auto industry show this view to be correct.
Step 4: Existing home resales moderate as consumer liquidity remains under pressure. New home sales remain strong. Since home resales generate M-2 and new home sales deplete M-2, this step is the critical step. Home resales peaked in June through November, 2005 and have persistently been under pressure since November. The National Association of Realtors continues to trim its 2006 forecast.
Step 5: Existing home resales decline. This step should occur when long-term mortgage rates reach an unattractive level. It could cause M-2 growth to decline and exacerbate consumer liquidity considerations.
Consumption and economic activity slows with household debt generation. Household debt generation did not decline during the 1st quarter of 2006. That fact proves that we were not in Step 5 at that point. However, the continuing decline in mortgages for refinancing and home purchases may prove that the 2nd quarter of 2006 is the start of Step 5. Other information would be consistent with that interpretation.
Step 6: New home sales and remodeling decline. Household debt generation declines further. Household cash flow and incomes decline. Economic activity probably enters a recession.
Consumer Cash Flow
In our paper, “Consumer Cash Flow”, we developed a Sources and Uses of Cash Flow statement for U.S. households using the format for corporations. In that paper, we demonstrated that most new consumer cash flow now comes from new debt.
In 2005, over 90% of new consumer cash flow came from debt. In 2006, we expect debt to provide 95% of consumer cash flow. In the following table, we show the latest estimates of consumer cash flow for 2005 and our early guesstimates for 2006.
Statement of Household Cash Flow
($ Billions)
Preliminary Guesstimate
2005 2006
Net Cash provided by Operating Activities $193.4 $90.9
Net Cash used in Investing Activities $(1,405.5) $(1,317.0)
Cash Flows from Financing Activities
Repayments of Debt (501.4) (527.1)
Increases in Debt 1,710.2 1,770.4
Net Cash provided by Financing Activities $1,208.8 $1,243.3
Net Increase(Decrease) in Cash and Equivalents $(3.3) $20.2
Cash and Equivalents at beginning of period 1,372.1 1,368.8
Cash and Equivalents at end of period $1,368.8 $1,389.0
Cash Flow from Debt 1,710.2 1,770.4
Total Cash Flow(Debt + Operating Cash) 1,903.6 1,861.3
Percentage Cash Flow from Debt 90% 95%
Our guesstimates for 2006 are troubling. The consumer is increasingly dependent on high levels of debt flow. Without these high levels of debt flow, either consumption or non-savings investment activities must decline. The only alternative would be for consumers to deplete the money supply in an attempt to maintain both consumption and investment activities.
Consumer Cash Flow Model
We also developed a Consumer Cash Flow model that integrates with money supply statistics. We now expect that 2006 will be much worse than 2005. In March, we expected that $313.4 billion would be transferred from non-M-1 M-2 to support M-1 during 2006 as opposed to $303.6 billion during 2005. We now expect that about $460 billion will be transferred during 2006; or an increase of over $150 billion.
Consumer Liquidity
In this section, we will show the trend in consumer liquidity. This section utilizes our “Interest Rate Conundrum” and “Real Estate and Money Supply” papers as the basis of the analysis.
In 2005, consumer liquidity began to drop significantly. The drop in liquidity levels has continued during 2006. Money supply information shows that liquidity improved briefly at the end of March. However, tax payments during April eliminated the improvement and liquidity has resumed its downward trend.
The chart below shows a one-month forward measure based on current checkable deposits as a percentage of the annual level of consumer cash expenditures including consumer debt service. The level is adjusted for the expected monthly decline from net cash flow.
Mortgage Financing Environment
In this section, we will update our analysis of the mortgage finance environment.
The chart below shows the actual relationship between the Freddie Mac mortgage rates and the average interest rates on existing mortgages. This relationship shows that current mortgage rates are now above existing average mortgage rates.
The current mortgage environment indicates that consumer debt generation is likely to become more difficult rather than less difficult. This potential could cause large implications for consumer liquidity, consumption and investment levels.
Summary
This paper shows that consumer liquidity levels are under pressure and are declining to potentially inadequate levels. In our March, 2006 update, we stated, “If our economy enters Step 5 of the process outlined on page 2 of this paper, the possibility that consumers will ‘reduce consumption and investing to protect liquidity’ escalates.”
Based on the most recently available information, we are uncertain whether the economy has entered Step 5 of our proposed process. However, recent information removes our doubts that we have reached Step 4 of the process. In our opinion, we have clearly reached Step 4.
In our interpretation of this process, the Federal Reserve MUST continue to raise short-term interest rates in order to prolong the opportunity for U.S. households to access long-term debt at high levels. If the Federal Reserve does not raise short-term interest rates, we would expect long-term interest rates to increase and cause a significant slowdown in the accumulation of real-estate based debt. A debt slowdown would hasten a recession.
*If you want our complete analysis free of charge, please go to www.piscataquaresearch.com.
July 02, 2006
Ruble Convertable
ITAR-TASS
MOSCOW, July 1 (Itar-Tass) -- July 1, 2006 may go down in history as the day of another revolution in Russia. This time, a financial one. Under the government’s decision the national currency becomes a fully convertible currency.
All restrictions in the sphere of currency control and regulation are lifted. Foreign and off-shore investors will be able to open ruble accounts in banks, and all limitations of ruble-denominated investments will disappear.
Under the original plan this was scheduled to happen no earlier than January 1, 2007. As he addressed the Federal Assembly with his state-of-the-nation message last May, President Vladimir Putin called for speeding up the transition process.
This measure will allow Russian citizens to invest in both domestic and foreign companies.
“The transition to the full convertibility is an indication where our financial system stands. It is also one of the fundamental principles of economic development, a sign of certain maturity of the Russian economy. Russia can now say that it is a mature economy,” Finance Minister Alexei Kudrin said.
Deputy Prime Minister Alexander Zhukov recalled that oil and gold had begun to be traded on a Russian exchange for rubles.
The Central Bank of Russia expects nothing dramatic following the abolition of restrictions on currency transactions as of July 1, though.%2
July 01, 2006
Commodity `Super Cycle' Remains in Place
2006-06-29 12:42 (New York)
June 29 (Bloomberg) -- The commodity ``super cycle'' remains in place because energy and mining companies have failed to invest in expanding production capacity, said Philip Richards, the chief executive officer of RAB Capital Plc.
``There haven't been any big surges in supply. It's a worrying situation, which means prices will be sustained at higher levels over a longer time,'' Richards said at a conference in London today.
``I still believe there is a lot of upside in commodities.'' Commodity prices, as measured by the Reuters/Jefferies CRB index of 19 commodities, have dropped 6.3 percent from the index's May 11 record as central banks in the U.S., Europe and China raised interest rates.
Growing demand from China, whose economic growth has averaged 8.8 percent in the past five years, combined with under-investment in production, has spurred the longest rally in commodity prices in five decades. Oil rose to a record $75.35 a barrel in April, copper to $8,800 a metric ton last month and gold to the highest in 26 years.
``We believe the bull market in commodities is just beginning and has a long way to run,'' Richards said. ``It was perceived that after two or three years of gains in commodities, it was time to get out. This perception is entirely wrong.''
RAB's Special Situations Fund, its largest, has a 90 percent holding in energy and mining companies and returned 61 percent in the past year. The fund was also the best-performing European managed equity strategies hedge funds in April, returning 14 percent. The publicly traded hedge fund manager has $4 billion under management.
Takeovers such as Phelps Dodge Corp., the world's third-largest copper producer, purchase of Canadian nickel miners Inco Ltd. And Falconbridge Ltd. for about $37.4 billion ``doesn't add to mining capacity,'' Richards said.
Why Are Americans So Angry?
HON. RON PAUL OF TEXAS
Before the U.S. House of Representatives
June 29, 2006
Fear and Anger over Iraq
Before the U.S. House of Representatives
June 29, 2006
I have been involved in politics for over 30 years and have never seen the American people so angry. It’s not unusual to sense a modest amount of outrage, but it seems the anger today is unusually intense and quite possibly worse than ever. It’s not easily explained, but I have some thoughts on this matter. Generally, anger and frustration among people are related to economic conditions; bread and butter issues. Yet today, according to government statistics, things are going well. We have low unemployment, low inflation, more homeowners than ever before, and abundant leisure with abundant luxuries. Even the poor have cell phones, televisions, and computers. Public school is free, and anyone can get free medical care at any emergency room in the country. Almost all taxes are paid by the top 50% of income earners. The lower 50% pay essentially no income taxes, yet general dissatisfaction and anger are commonplace. The old slogan “It’s the economy, stupid,” just doesn’t seem to explain things
Some say it’s the war, yet we’ve lived with war throughout the 20th century. The bigger they were the more we pulled together. And the current war, by comparison, has fewer American casualties than the rest. So it can’t just be the war itself.
People complain about corruption, but what’s new about government corruption? In the 19th century we had railroad scandals; in the 20th century we endured the Teapot Dome scandal, Watergate, Koreagate, and many others without too much anger and resentment. Yet today it seems anger is pervasive and worse than we’ve experienced in the past.
Could it be that war, vague yet persistent economic uncertainty, corruption, and the immigration problem all contribute to the anger we feel in America? Perhaps, but it’s almost as though people aren’t exactly sure why they are so uneasy. They only know that they’ve had it and aren’t going to put up with it anymore.
High gasoline prices make a lot of people angry, though there is little understanding of how deficits, inflation, and war in the Middle East all contribute to these higher prices.
Generally speaking, there are two controlling forces that determine the nature of government: the people’s concern for their economic self interests; and the philosophy of those who hold positions of power and influence in any particular government. Under Soviet Communism the workers believed their economic best interests were being served, while a few dedicated theoreticians placed themselves in positions of power. Likewise, the intellectual leaders of the American Revolution were few, but rallied the colonists to risk all to overthrow a tyrannical king.
Since there’s never a perfect understanding between these two forces, the people and the philosophical leaders, and because the motivations of the intellectual leaders vary greatly, any transition from one system of government to another is unpredictable. The communist takeover by Lenin was violent and costly; the demise of communism and the acceptance of a relatively open system in the former Soviet Union occurred in a miraculous manner. Both systems had intellectual underpinnings.
In the United States over the last century we have witnessed the coming and going of various intellectual influences by proponents of the free market, Keynesian welfarism, varieties of socialism, and supply-side economics. In foreign policy we’ve seen a transition from the founder’s vision of non-intervention in the affairs of others to internationalism, unilateral nation building, and policing the world. We now have in place a policy, driven by determined neo-conservatives, to promote American “goodness” and democracy throughout the world by military force-- with particular emphasis on remaking the Middle East.
We all know that ideas do have consequences. Bad ideas, even when supported naively by the people, will have bad results. Could it be the people sense, in a profound way, that the policies of recent decades are unworkable-- and thus they have instinctively lost confidence in their government leaders? This certainly happened in the final years of the Soviet system. Though not fully understood, this sense of frustration may well be the source of anger we hear expressed on a daily basis by so many.
No matter how noble the motivations of political leaders are, when they achieve positions of power the power itself inevitably becomes their driving force. Government officials too often yield to the temptations and corrupting influences of power.
But there are many others who are not bashful about using government power to do “good.” They truly believe they can make the economy fair through a redistributive tax and spending system; make the people moral by regulating personal behavior and choices; and remake the world in our image using armies. They argue that the use of force to achieve good is legitimate and proper for government-- always speaking of the noble goals while ignoring the inevitable failures and evils caused by coercion.
Not only do they justify government force, they believe they have a moral obligation to do so.
Once we concede government has this “legitimate” function and can be manipulated by a majority vote, the various special interests move in quickly. They gain control to direct government largesse for their own benefit. Too often it is corporate interests who learn how to manipulate every contract, regulation and tax policy. Likewise, promoters of the “progressive” agenda, always hostile to property rights, compete for government power through safety, health, and environmental initiatives. Both groups resort to using government power-- and abuse this power-- in an effort to serve their narrow interests. In the meantime, constitutional limits on power and its mandate to protect liberty are totally forgotten.
Since the use of power to achieve political ends is accepted, pervasive, and ever expanding, popular support for various programs is achieved by creating fear. Sometimes the fear is concocted out of thin air, but usually it’s created by wildly exaggerating a problem or incident that does not warrant the proposed government “solution.” Often government caused the problem in the first place. The irony, of course, is that government action rarely solves any problem, but rather worsens existing problems or creates altogether new ones.
Fear is generated to garner popular support for the proposed government action, even when some liberty has to be sacrificed. This leads to a society that is systemically driven toward fear-- fear that gives the monstrous government more and more authority and control over our lives and property.
Fear is constantly generated by politicians to rally the support of the people.
Environmentalists go back and forth, from warning about a coming ice age to arguing the grave dangers of global warming.
It is said that without an economic safety net-- for everyone, from cradle to grave-- people would starve and many would become homeless.
It is said that without government health care, the poor would not receive treatment. Medical care would be available only to the rich.
Without government insuring pensions, all private pensions would be threatened.
Without federal assistance, there would be no funds for public education, and the quality of our public schools would diminish-- ignoring recent history to the contrary.
It is argued that without government surveillance of every American, even without search warrants, security cannot be achieved. The sacrifice of some liberty is required for security of our citizens, they claim.
We are constantly told that the next terrorist attack could come at any moment. Rather than questioning why we might be attacked, this atmosphere of fear instead prompts giving up liberty and privacy. 9/11 has been conveniently used to generate the fear necessary to expand both our foreign intervention and domestic surveillance.
Fear of nuclear power is used to assure shortages and highly expensive energy.
In all instances where fear is generated and used to expand government control, it’s safe to say the problems behind the fears were not caused by the free market economy, or too much privacy, or excessive liberty.
It’s easy to generate fear, fear that too often becomes excessive, unrealistic, and difficult to curb. This is important: It leads to even more demands for government action than the perpetrators of the fear actually anticipated.
Once people look to government to alleviate their fears and make them safe, expectations exceed reality. FEMA originally had a small role, but its current mission is to centrally manage every natural disaster that befalls us. This mission was exposed as a fraud during last year’s hurricanes; incompetence and corruption are now FEMA’s legacy. This generates anger among those who have to pay the bills, and among those who didn’t receive the handouts promised to them quickly enough.
Generating exaggerated fear to justify and promote attacks on private property is commonplace. It serves to inflame resentment between the producers in society and the so-called victims, whose demands grow exponentially.
The economic impossibility of this system guarantees that the harder government tries to satisfy the unlimited demands, the worse the problems become. We won’t be able to pay the bills forever, and eventually our ability to borrow and print new money must end. This dependency on government will guarantee anger when the money runs out. Today we’re still able to borrow and inflate, but budgets are getting tighter and people sense serious problems lurking in the future. This fear is legitimate. No easy solution to our fiscal problems is readily apparent, and this ignites anger and apprehension.
Disenchantment is directed at the politicians and their false promises, made in order to secure reelection and exert power that so many of them enjoy.
It is, however, in foreign affairs that governments have most abused fear to generate support for an agenda that under normal circumstances would have been rejected. For decades our administrations have targeted one supposed “Hitler” after another to gain support for military action against a particular country. Today we have three choices termed the axis of evil: Iran, Iraq or North Korea.
We recently witnessed how unfounded fear was generated concerning Saddam Hussein’s weapons of mass destruction to justify our first ever pre-emptive war. It is now universally known the fear was based on falsehoods. And yet the war goes on; the death and destruction continue.
This is not a new phenomenon. General Douglas MacArthur understood the political use of fear when he made this famous statement:
“Always there has been some terrible evil at home or some monstrous foreign power that was going to gobble us up if we did not blindly rally behind it.”
We should be ever vigilant when we hear the fear mongers preparing us for the next military conflict our young men and women will be expected to fight. We’re being told of the great danger posed by Almadinejad in Iran and Kim Jung Il in North Korea. Even Russia and China bashing is in vogue again. And we’re still not able to trade with or travel to Cuba. A constant enemy is required to expand the state. More and more news stories blame Iran for the bad results in Iraq. Does this mean Iran is next on the hit list?
The world is much too dangerous, we’re told, and therefore we must be prepared to fight at a moment’s notice, regardless of the cost. If the public could not be manipulated by politicians’ efforts to instill needless fear, fewer wars would be fought and far fewer lives would be lost.Fear and Anger over Iraq
Though the American people are fed up for a lot of legitimate reasons, almost all polls show the mess in Iraq leads the list of why the anger is so intense.
Short wars, with well-defined victories, are tolerated by the American people even when they are misled as to the reasons for the war. Wars entered into without a proper declaration tend to be politically motivated and not for national security reasons. These wars, by their very nature, are prolonged, costly, and usually require a new administration to finally end them. This certainly was true with the Korean and Vietnam wars. The lack of a quick military success, the loss of life and limb, and the huge economic costs of lengthy wars precipitate anger. This is overwhelmingly true when the war propaganda that stirred up illegitimate fears is exposed as a fraud. Most soon come to realize the promise of guns and butter is an illusion. They come to understand that inflation, a weak economy, and a prolonged war without real success are the reality.
The anger over the Iraq war is multifaceted. Some are angry believing they were lied to in order to gain their support at the beginning. Others are angry that the forty billion dollars we spend every year on intelligence gathering failed to provide good information. Proponents of the war too often are unable to admit the truth. They become frustrated with the progress of the war and then turn on those wanting to change course, angrily denouncing them as unpatriotic and un-American.
Those accused are quick to respond to the insulting charges made by those who want to fight on forever without regard to casualties. Proponents of the war do not hesitate to challenge the manhood of war critics, accusing them of wanting to cut and run. Some war supporters ducked military service themselves while others fought and died, only adding to the anger of those who have seen battle up close and now question our campaign in Iraq.
When people see a $600 million embassy being built in Baghdad, while funding for services here in the United States is hard to obtain, they become angry. They can’t understand why the money is being spent, especially when they are told by our government that we have no intention of remaining permanently in Iraq.
The bickering and anger will not subside soon, since victory in Iraq is not on the horizon and a change in policy is not likely either.
The neoconservative instigators of the war are angry at everyone: at the people who want to get out of Iraq; and especially at those prosecuting the war for not bombing more aggressively, sending in more troops, and expanding the war into Iran.
As our country becomes poorer due to the cost of the war, anger surely will escalate. Much of it will be justified.
It seems bizarre that it’s so unthinkable to change course if the current policy is failing. Our leaders are like a physician who makes a wrong diagnosis and prescribes the wrong medicine, but because of his ego can’t tell the patient he made a mistake. Instead he hopes the patient will get better on his own. But instead of improving, the patient gets worse from the medication wrongly prescribed. This would be abhorrent behavior in medicine, but tragically it is commonplace in politics.
If the truth is admitted, it would appear that the lives lost and the money spent have been in vain. Instead, more casualties must be sustained to prove a false premise. What a tragedy! If the truth is admitted, imagine the anger of all the families that already have suffered such a burden. That burden is softened when the families and the wounded are told their great sacrifice was worthy, and required to preserve our freedoms and our Constitution.
But no one is allowed to ask the obvious. How have the 2,500 plus deaths, and the 18,500 wounded, made us more free? What in the world does Iraq have to do with protecting our civil liberties here at home? What national security threat prompted America’s first pre-emptive war? How does our unilateral enforcement of UN resolutions enhance our freedoms?
These questions aren’t permitted. They are not politically correct. I agree that the truth hurts, and these questions are terribly hurtful to the families that have suffered so much. What a horrible thought it would be to find out the cause for which we fight is not quite so noble.
I don’t believe those who hide from the truth and refuse to face the reality of the war do so deliberately. The pain is too great. Deep down, psychologically, many are incapable of admitting such a costly and emotionally damaging error. They instead become even greater and more determined supporters of the failed policy.
I would concede that there are some-- especially the die-hard neoconservatives, who believe it is our moral duty to spread American goodness through force and remake the Middle East-- who neither suffer regrets nor are bothered by the casualties. They continue to argue for more war without remorse, as long as they themselves do not have to fight. Criticism is reserved for the wimps who want to “cut and run.”
Due to the psychological need to persist with the failed policy, the war proponents must remain in denial of many facts staring them in the face.
They refuse to accept that the real reason for our invasion and occupation of Iraq was not related to terrorism.
They deny that our military is weaker as a consequence of this war.
They won’t admit that our invasion has served the interests of Osama Bin Laden. They continue to blame our image problems around the world on a few bad apples.
They won’t admit that our invasion has served the interests of Iran’s radical regime.
The cost in lives lost and dollars spent is glossed over, and the deficit spirals up without concern.
They ridicule those who point out that our relationships with our allies have been significantly damaged.
We have provided a tremendous incentive for Russia and China, and others like Iran, to organize through the Shanghai Cooperation Organization. They entertain future challenges to our plans to dominate South East Asia, the Middle East, and all its oil.
Radicalizing the Middle East will in the long term jeopardize Israel’s security, and increase the odds of this war spreading.
War supporters cannot see that for every Iraqi killed, another family turns on us-- regardless of who did the killing. We are and will continue to be blamed for every wrong done in Iraq: all deaths, illness, water problems, food shortages, and electricity outages.
As long as our political leaders persist in these denials, the war won’t end. The problem is that this is the source of the anger, because the American people are not in denial and want a change in policy.
Policy changes in wartime are difficult, for it is almost impossible for the administration to change course since so much emotional energy has been invested in the effort. That’s why Eisenhower ended the Korean War, and not Truman. That’s why Nixon ended the Vietnam War, and not LBJ. Even in the case of Vietnam the end was too slow and costly, as more then 30,000 military deaths came after Nixon’s election in 1968. It makes a lot more sense to avoid unnecessary wars than to overcome the politics involved in stopping them once started. I personally am convinced that many of our wars could be prevented by paying stricter attention to the method whereby our troops are committed to battle. I also am convinced that when Congress does not declare war, victory is unlikely.
The most important thing Congress can do to prevent needless and foolish wars is for every member to take seriously his or her oath to obey the Constitution. Wars should be entered into only after great deliberation and caution. Wars that are declared by Congress should reflect the support of the people, and the goal should be a quick and successful resolution.
Our undeclared wars over the past 65 years have dragged on without precise victories. We fight to spread American values, to enforce UN resolutions, and to slay supposed Hitlers. We forget that we once spread American values by persuasion and setting an example-- not by bombs and preemptive invasions. Nowhere in the Constitution are we permitted to go to war on behalf of the United Nations at the sacrifice of our national sovereignty. We repeatedly use military force against former allies, thugs we helped empower—like Saddam Hussein and Osama bin Laden—even when they pose no danger to us.
The 2002 resolution allowing the president to decide when and if to invade Iraq is an embarrassment. The Constitution authorizes only Congress to declare war. Our refusal to declare war transferred power to the president illegally, without a constitutional amendment. Congress did this with a simple resolution, passed by majority vote. This means Congress reneged on its responsibility as a separate branch of government, and should be held accountable for the bad policy in Iraq that the majority of Americans are now upset about. Congress is every bit as much at fault as the president.
Constitutional questions aside, the American people should have demanded more answers from their government before they supported the invasion and occupation of a foreign country.
Some of the strongest supporters of the war declare that we are a Christian nation, yet use their religious beliefs to justify the war. They claim it is our Christian duty to remake the Middle East and attack the Muslim infidels. Evidently I have been reading from a different Bible. I remember something about “Blessed are the peacemakers.”
My beliefs aside, Christian teaching of nearly a thousand years reinforces the concept of “The Just War Theory.” This Christian theory emphasizes six criteria needed to justify Christian participation in war. Briefly the six points are as follows:
- War should be fought only in self defense;
- War should be undertaken only as a last resort;
- A decision to enter war should be made only by a legitimate authority;
- All military responses must be proportional to the threat;
- There must be a reasonable chance of success; and
- A public declaration notifying all parties concerned is required.
The war in Iraq fails to meet almost all of these requirements. This discrepancy has generated anger and division within the Christian community.
Some are angry because the war is being fought out of Christian duty, yet does not have uniform support from all Christians. Others are angry because they see Christianity as a religion as peace and forgiveness, not war and annihilation of enemies.
Constitutional and moral restraints on war should be strictly followed. It is understandable when kings, dictators, and tyrants take their people into war, since it serves their selfish interests-- and those sent to fight have no say in the matter. It is more difficult to understand why democracies and democratic legislative bodies, which have a say over the issue of war, so readily submit to the executive branch of government. The determined effort of the authors of our Constitution to firmly place the power to declare war in the legislative branch has been ignored in the decades following WWII.
Many members have confided in me that they are quite comfortable with this arrangement. They flatly do not expect, in this modern age, to formally declare war ever again. Yet no one predicts there will be fewer wars fought. It is instead assumed they will be ordered by the executive branch or the United Nations-- a rather sad commentary.
What about the practical arguments against war, since no one seems interested in exerting constitutional or moral restraints? Why do we continue to fight prolonged, political wars when the practical results are so bad? Our undeclared wars since 1945 have been very costly, to put it mildly. We have suffered over one hundred thousand military deaths, and even more serious casualties. Tens of thousands have suffered from serious war-related illnesses. Sadly, we as a nation express essentially no concern for the millions of civilian casualties in the countries where we fought.
The cost of war since 1945, and our military presence in over 100 countries, exceeds two trillion dollars in today’s dollars. The cost in higher taxes, debt, and persistent inflation is immeasurable. Likewise, the economic opportunities lost by diverting trillions of dollars into war is impossible to measure, but it is huge. Yet our presidents persist in picking fights with countries that pose no threat to us, refusing to participate in true diplomacy to resolve differences. Congress over the decades has never resisted the political pressures to send our troops abroad on missions that defy imagination.
When the people object to a new adventure, the propaganda machine goes into action to make sure critics are seen as unpatriotic Americans or even traitors.
The military-industrial complex we were warned about has been transformed into a military-media-industrial-government complex that is capable of silencing the dissenters and cheerleading for war. It’s only after years of failure that people are able to overcome the propaganda for war and pressure their representatives in Congress to stop the needless killing. Many times the economic costs of war stir people to demand an end. This time around the war might be brought to a halt by our actual inability to pay the bills due to a dollar crisis. A dollar crisis will make borrowing 2.5 billion dollars per day from foreign powers like China and Japan virtually impossible, at least at affordable interest rates.
That’s when we will be forced to reassess the spending spree, both at home and abroad.
The solution to this mess is not complicated; but the changes needed are nearly impossible for political reasons. Sound free market economics, sound money, and a sensible foreign policy would all result from strict adherence to the Constitution. If the people desired it, and Congress was filled with responsible members, a smooth although challenging transition could be achieved. Since this is unlikely, we can only hope that the rule of law and the goal of liberty can be reestablished without chaos.
We must move quickly toward a more traditional American foreign policy of peace, friendship, and trade with all nations; entangling alliances with none. We must reject the notion that we can or should make the world safe for democracy. We must forget about being the world’s policeman. We should disengage from the unworkable and unforgiving task of nation building. We must reject the notion that our military should be used to protect natural resources, private investments, or serve the interest of any foreign government or the United Nations. Our military should be designed for one purpose: defending our national security. It’s time to come home now, before financial conditions or military weakness dictates it.
The major obstacle to a sensible foreign policy is the fiction about what patriotism means. Today patriotism has come to mean blind support for the government and its policies. In earlier times patriotism meant having the willingness and courage to challenge government policies regardless of popular perceptions.
Today we constantly hear innuendos and direct insults aimed at those who dare to challenge current foreign policy, no matter how flawed that policy may be. I would suggest it takes more courage to admit the truth, to admit mistakes, than to attack others as unpatriotic for disagreeing with the war in Iraq.
Remember, the original American patriots challenged the abuses of King George, and wrote and carried out the Declaration of Independence.
Yes Mr. Speaker, there is a lot of anger in this country. Much of it is justified; some of it is totally unnecessary and misdirected. The only thing that can lessen this anger is an informed public, a better understanding of economic principles, a rejection of foreign intervention, and a strict adherence to the constitutional rule of law. This will be difficult to achieve, but it’s not impossible and well worth the effort.